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APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 1
F INANCIAL STATEMENTS
ANNUAL REPORT &
2013
HEAD OFFICE
APOLLO CENTRE, RING ROAD PARKLANDS,
WESTLANDS
P.O. BOX 30389 - 00100 NAIROBI
TEL: +254 (0) 20 364 1000
FAX: +254 (0) 20 364 1100
E-mail: [email protected]
Website: www.apalife.co.ke
BRANCH OFFICES
CITY CENTRE
6TH FLOOR, HUGHES BUILDING,
KENYATTA AVENUE
P.O. BOX 30065 - 00100, NAIROBI
TEL: +254 (0) 20 286 2000
FAX: +254 (0) 20 286 2200
NAKURU
GIDDO PLAZA, GEORGE MORARA ROAD
P.O. BOX 14188 - 20100, NAKURU
TEL: 051 221 3412/6
PILOT LINE: 020 286 2337
FAX: 051 221 3449
E-mail: [email protected]
MOMBASA
APOLLO HOUSE, MOI AVENUE
P.O. BOX 81821 - 80100, MOMBASA
TEL: 041 222 1941/7506
PILOT LINE: 020 286 2346
FAX: 041 222 5661
E-mail: [email protected]
KISUMU
MEGA CITY, OFF KISUMU - NAIROBI ROAD
P.O. BOX 632 - 40100, KISUMU
TEL: 057 202 4860
PILOT LINE: 020 286 2322
FAX: 057 202 4860
E-mail: [email protected]
NAIVASHA
1ST FLOOR, EAGLE CENTRE
MBARIA KANIU ROAD
P.O. BOX 1819 - 20117, NAIVASHA
TEL: 050 202 0086
PILOT LINE: 020 286 2353
FAX: 050 202 0086
E-mail: [email protected]
ELDORET
1ST FLOOR, IMPERIAL COURT, UGANDA ROAD
P.O. BOX 3600 - 30100, ELDORET
TEL: 053 203 0937
PILOT LINE: 020 286 2332
FAX: 053 203 0938
E-mail: [email protected]
THIKA
4TH FLOOR, THIKA ARCADE
P.O. BOX 4400 - 01002, THIKA
TEL: 061 20196
PILOT LINE: 020 286 2300
FAX: 067 20 197
E-mail: [email protected]
MERU
2ND FLOOR, TWIN PLAZA, GHANA ROAD
P.O. BOX 3298 - 60200, MERU
TEL: 064 31823
PILOT LINE: 020 286 2312
FAX: 064 31 821
E-mail: [email protected]
NYERI
1ST FLOOR, PEAK BUSINESS CENTRE,
OFF KENYATTA HIGHWAY
P.O. BOX 2443 - 10100, NYERI
TEL: 061 203 0332
PILOT LINE: 020 286 2307
FAX: 061 203 0332
E-mail: [email protected]
EMBU
2ND FLOOR, SPARKO BUILDING,
KENYATTA HIGHWAY
P.O. BOX 1817 - 60100, EMBU
TEL: 068 30 103
PILOT LINE: 020 286 2317
FAX: 068 30 104
E-mail: [email protected]
KISII
OURU COMPLEX, KISII - KISUMU ROAD
P.O. BOX 3479 - 40200, KISII
TEL: 058 31 773
PILOT LINE: 020 286 2327
FAX: 058 31 773
E-mail: [email protected]
MACHAKOS
ABC IMANI PLAZA, NGEI ROAD
TEL: 044 21 455
PILOT LINE: 020 286 2347
FAX: 044 21 456
E-mail: [email protected]
OTHER GROUP COMPANIES
APA INSURANCE KENYA LIMITED
APOLLO CENTRE, RING ROAD PARKLANDS,
WESTLANDS
P.O. BOX 30389 - 00100 NAIROBI
TEL: +254 (0) 20 286 2000
FAX: +254 (0) 20 286 2200
E-mail: [email protected]
Website: www.apainsurance.org
APA INSURANCE (UGANDA) LIMITED
CROWN HOUSE, 1ST FLOOR
KAMPALA ROAD, KAMPALA
P.O. BOX: 7651, KAMPALA
TEL: +256 (40) 425 0087 / 1103
Website: www.apainsuranceuganda.com
APOLLO ASSET MANAGEMENT
COMPANY LIMITED
APOLLO CENTRE,
RING ROAD PARKLANDS, WESTLANDS, NAIROBI
TEL: +254 020 364 1000
E-mail: [email protected]
Website: apolloassetmanagement.co.ke
ASSOCIATES
GORDON COURT LIMITED
APOLLO CENTRE, RING ROAD, PARKLANDS
P.O. BOX: 30389 - 00100, NAIROBI
TEL: +254 020 364 1000
E-mail: [email protected]
Website: www.apollocentre.org
RELIANCE INSURANCE COMPANY
(TANZANIA) LTD.
3RD & 4TH FLOOR RELIANCE HOUSE,
PLOT NO. 356 UPANGA, UNITED NATIONS ROAD
P.O. BOX 9826, DAR ES SALAAM
TEL: +255 (22) 212 0088 - 90
FAX: +255 (22) 211 2903
E-mail: [email protected]
Website: www.reliancetz.com
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)2
Table of ContentsVision & Mission 5
Board of Directors 6 - 7
Management 8 - 9
Corporate Information 10
Chairman’s Statement 11 - 13
Corporate Governance Statement 14 - 16
Report of the Directors 17
Statement of Directors’ Responsibilities 18
Report of the Consulting Actuary 19
Independent Auditors’ Report 20
Corporate Social Responsibility 21 - 23
Group Structure 24
Financial Statements:
Statement of Profit or Loss and Other Comprehensive Income 26
Statement of Financial Position 27
Statement of Changes in Equity 28
Statement of Cash Flows 29
Accounting Policies 32 - 40
Notes to the Financial Statements 44 - 65
Supplementary Information
Revenue Account 66
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 3
4
VISIONWe are the region’s most respected group,
creating and protecting wealth
MISSIONWe put smiles on the faces of
our stakeholders
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 5
• Doug Lacey • Pratul Shah • P.J. Shah • S.M. Shah • Ashok Shah • Rick Ashley • Mugo Kibati • Daniel Ndonye
Director Company Secretary Director Director Director Director Chairman Director
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)6
BOARD OF DIRECTORS
• Doug Lacey • Pratul Shah • P.J. Shah • S.M. Shah • Ashok Shah • Rick Ashley • Mugo Kibati • Daniel Ndonye
Director Company Secretary Director Director Director Director Chairman Director
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 7
MANAGEMENT
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)8
• Evans Manduku
Head of Group Business Development
• Daniel Mugo
Chief Finance Officer
• Benedicto Makena
National Sales Manager
• Judy Kinyanjui
Head of Human Resources
• Aggrey Mulumbi
Principal Officer
• Nashipae Orumoy
Head of Corporate Communications
• Jane Watiki
Head of Operations
• Wilbroda Odera
Project Manager
• Cynthia Arami
Business Development Manager (Pensions)
• Stephen Muiga
Business Development Manager(Credit Life & Micro Insurance)
• Evans Manduku
Head of Group Business Development
• Daniel Mugo
Chief Finance Officer
• Benedicto Makena
National Sales Manager
• Judy Kinyanjui
Head of Human Resources
• Aggrey Mulumbi
Principal Officer
• Nashipae Orumoy
Head of Corporate Communications
• Jane Watiki
Head of Operations
• Wilbroda Odera
Project Manager
• Cynthia Arami
Business Development Manager (Pensions)
• Stephen Muiga
Business Development Manager(Credit Life & Micro Insurance)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 9
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)10
CORPORATE INFORMATION
Board of Directors
M Kibati - Chairman
D.M. Ndonye
A.K.M. Shah*
D.N.Lacey**
S.M. Shah
P.J. Shah
R.M. Ashley**
British* South African**
Independent AuditorsDeloitte & Touche
Certified Public Accountants (Kenya)
Deloitte Place, Waiyaki Way, Muthangari
P.O. Box 40029-00100
Nairobi
BankersCommercial Bank of Africa Limited
P.O. Box 30437-00100
Nairobi
Consulting Actuaries
Giles T.Waugh, FASSA, FIA
Independent Actuarial Consultant
Tel: +27 11 646 0199/ +27 83 680 7990
Johannesburg
Registered Office Apollo Centre,
07 Ring Road Parklands, Westlands
P.O. Box 30389 - 00100
Tel: +254 (0) 20 364 1000
Nairobi
Agency Offices
Apollo House,
Moi Avenue
P.O. Box 81821 - 80100,
Mombasa
Tel: 041 222 1941/7506
Hughes Building,
Kenyatta Avenue
P.O. Box 30389 - 00100,
Nairobi
Tel: +254 (0) 20 364 1000
Peak Business Centre,
off Kenyatta Highway
P.O. Box 2443 - 10100,
Nyeri
Tel: 061 203 0332
Giddo Plaza,
George Morara Road
P.O. Box 14188 - 20100
Nakuru Tel: 051 221 3412/6
CHAIRMAN’SSTATEMENT
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 11
I am pleased to present the annual report and financial statements for the year ended
31 December, 2013.
Economy
Kenya maintained a stable economic environment and fiscal discipline despite the fiscal
pressures arising from the General Elections that took place in March 2013, under the
new devolved system of governance.
Kenya’s GDP is estimated to have grown to 4.8%, a marginal improvement on the 4.6%
recorded in 2012. This was supported by the smooth transition of government; an increase
in the capital inflows brought about, partly by the increased infrastructure activities; and
single digit inflation rates as well as a stable exchange rate regime in the last 18 months.
Other contributors to the growth included the improved performances in financial
intermediation, transport and communication, wholesale and retail trade, manufacturing,
construction and mining and quarrying activities. There was a slowdown in the growth
of the agriculture and forestry sectors which impacted negatively on the economic
performance.
Inflation edged upwards to an average of 6.99% in the third quarter of 2013 compared
to an average of 6.39% during a similar period in 2012. This was influenced by the
implementation of the VAT Act 2013 leading to an increase in prices of a number of basic
commodities. Year on year inflation closed lower at 7.15% having peaked at 8.29% in
the month of September 2013.
The Central Bank of Kenya Monetary Policy Committee (“MPC”) undertook a
moderate stance on interest rates. With inflationary numbers being largely
stable, the MPC avoided calls to lower CBR rates in tandem with inflation
and argued for more policy actions to filter through the economy while
they maintained a watchful role.
Change of Name
In November 2013, the shareholders resolved to change the name of
the company from Apollo Life Assurance Limited to APA Life Assurance
Limited. The change was in line with the Group’s long-term strategy
to carry out its insurance business under a single brand. We are
committed to providing our customers with world-class services
and promise to leverage on the brand equity and maximize
value for you.
2013 Performance Review
In 2013, we recorded gross premium income of KShs.
415 Million compared to KShs 217 Million in 2012 for
the ordinary life and group life insurance business lines,
translating to 91% year on year growth. The pension
business line recorded a 29% growth in contributions from
KShs 247 Million in 2012 to KShs 318 Million.
The total profits and other comprehensive income for the
year was KShs 106 Million, representing a 200% growth on
the KShs 53 Million reported in 2012.
CHAIRMAN’S STATEMENT
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 13
The total asset base grew by 35% to stand at KShs 2.76 Billion at end
of December 2013, up from 2.04 Billion in 2012.
Our deposit administration fund maintained a steady growth of
32% to stand at KShs 1.5 Billion at end of the year, up from KShs
1.2 Billion in 2012. In consultation with our Statutory Actuary, the
Board of Directors approved a reversionary bonus of 4% on the “with
profit individual life” policies and interest of 14%, (2012: 12.50%) on
deposit administration schemes and individual pension plan funds.
The total revenue including the DAP contribution was KShs
733 Million (2012 KShs 464 Million). The notable growth is
attributable to the growth strategy that the group has put in
place. As part of the strategy, the Company undertook a key strategic
decision to re-enter the individual life business arena with products
that support individuals and families through all the stages of their
lives, providing both savings and protection needs to give financial
security to all social segments of the society, with greater focus on the
financially underserved segment. We have launched four individual
life products under the brand names APA Elimu Plan, Hosicare,
Pumzisha and Imarika which have been well received by the market.
We have also re-established our individual life agency channel with
over 100 agents already on board by mid 2014.
The shareholders supported this new business initiative by injecting
additional capital of KShs 100 Million into business. The company’s
capitalization therefore stood at KShs 250 Million; a capital much
higher than the minimum regulatory requirement of KShs 150 Million.
The Company has implemented a fully integrated life management
system that has enabled the business to fully automate its operations.
The key benefits that we will derive from the new system include
efficient and more effective service delivery to our clients and producers
through self-service client and agent portals. The system will enable us
to fully exploit the opportunities presented in the alternative distribution
channels of bancassurance and mobile platforms. Through this
service differentiation initiative, we aim continuously to benchmark
our service delivery to the best practices worldwide.
As a business, we have put emphasis on best underwriting, claims
settlement and management practices. Our commitment and success
in these initiatives were best demonstrated and acknowledged by the
Industry through its representative body AKI which awarded us the
1st Runners Up Group Life Best Practice Award for 2013; and by the
independent Think Business Awards at which we won the Best Claims
Settlement Award for 2013.
As part of the strategy, staff development and training has become
an important milestone in our Human Capital Development. This,
together with emphasis on a new incentivisation process, will see a
strong motivated workforce.
Future Outlook
The East African economies are expected to continue benefitting from
stable interest rates at lower levels than those experienced in the
second half of 2013 and first quarter of 2014. The improved weather
conditions, continued prudent macroeconomic management and
improving business confidence will underpin the growth. The World
Bank has forecasted that Kenya is expected to accelerate to at least
5% growth in 2014.
Significant capital spends in infrastructure and consumption-led
growth are likely to propel GDP growth to higher levels in 2015-2016.
These are expected to positively impact the levels of disposable income
available to individual households. We aim to be at the forefront of
providers, seeking to increase our share of the increased incomes.
While remaining cognizant of the prevailing market conditions, the
company’s commitment to its long term strategy and a disciplined
execution of the same has enabled us to remain on a positive growth
trajectory. We plan to sustain the growth momentum through a
lean but efficient operating structure, strengthened individual life
agency distribution network, product development targeting specific
underserved segments and strong use of the alternative distribution
channels. The company will continue to seek to be acclaimed for its
distinguished services and delivery of the insurance promise by both
the industry players and independent bodies. We plan to enhance
our market share and contribute to the deepening of life assurance
penetration in the country.
Following the recent enactment of the NSSF 2013 Act, we have
been engaging our customers and the public on the requirements
of the new law. We have committed to help our customers navigate
through, and attain full compliance with, the requirements by
placing their Tier II pensions business with us. This will help our
Deposit Administration Portfolio to achieve significant growth this year
and beyond.
We are confident that these initiatives will translate into improved
earnings for our shareholders.
Acknowledgement
My appreciation to the policy holders, the intermediaries and our
business partners for their support, I wish to thank the management
and staff for their commitment, loyalty and dedication in driving
the Company forward. Finally, I wish to thank my fellow Directors
and record my appreciation for their continued support and
considered advice.
Mugo Kibati Chairman
14 April, 2014
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)14
Introduction:
Good corporate governance is key to the integrity of corporations,
financial institutions and markets and is central to the health of
our economies and their stability. Corporate governance plays a
leading role in determining how corporations and their boards and
management are directed, controlled and held to account. Corporate
governance therefore encompasses the systems, practices and
procedures by which an individual corporation regulates itself in order
to remain competitive, ethical, sustainable and fair.
The board of APA Life Assurance Limited follows principles of openness,
integrity and accountability in its stewardship of the Company’s affairs.
It recognizes the developing nature of corporate governance and
assesses the Company’s compliance with generally accepted corporate
governance practice on a regular basis. The role of the Board is
to ensure compliance by focusing on and providing the company
overall strategic direction and policy-making. It is also responsible
for the Company’s performance review through accountability while
ensuring appropriate monitoring and supervision. The Board is also
responsible for the overall system of internal control and for reviewing
its effectiveness. The controls are designed to safeguard the Company’s
assets and also ensure the reliability of financial information. A senior
management team, comprising directors and senior managers, meets
regularly to consider issues of operational and strategic importance to
the Company.
Below are the key features of the existing corporate governance
practices within APA Life Assurance Limited:
Board of Directors
The Board of Directors consists of seven non-executive directors of
which three directors are independent and all of whom have been
appointed in accordance with the provisions of the Insurance Act
and the Corporate Governance Guidelines issued by the Insurance
Regulatory Authority. The Chairman of the Board is an independent
non-executive director. The Board is responsible for setting the direction
of the Company through the establishment of strategic objectives, key
policies and the approval of budgets. It monitors the implementation
of strategies and policies through a structured approach to reporting
by executive management leading to consequent accountability.
The directors are actively involved in, and bring strong independent
judgment to bear on board deliberations and discussions. These
directors have a wide range of knowledge and experience of local and
international markets which is applied to the formulation of strategic
objectives and decision making.
All directors have access to the advice and services of the company
secretary (who also sits in every committee and board meeting) and
are entitled to obtain independent professional advice on company
affairs at the Company’s expense.
Committees of the Board
To assist the Board better discharge its responsibilities, the Board has
constituted several Board Committees, comprising a balanced mix of
non-executive directors, senior management, consultants, experts and
service providers are on occasion invited to the Board as circumstances
dictate to provide their expertise. The delegation by the Board to these
committees does not detract the Board from its ultimate collective
accountability for the performance and good governance of the Company.
Each Board Committee has a Charter which contains provisions
relating to; their powers, membership and duties.
The Board Committees are as follows:
• Investment Committee
• Audit Committee
• Information Communication Technology Committee
• Remuneration Committee
3. Internal Control
The Company has implemented and maintains internal controls
designed to provide reasonable assurance as to the integrity
and reliability of the financial statements and to adequately
safeguard and maintain accountability of the Company’s assets.
Such controls are based on established policies and procedures
and are implemented by trained personnel with appropriate
segregation of duties. The effectiveness of the system of internal
controls is monitored regularly through operational meetings.
4. Related Party Transactions
The related party transactions with the Company during the year
ended 31 December, 2013 are detailed under note 62 on page 63
of the annual report and financial statements. The remuneration for
directors consists of fees and sitting allowances for their services in
connection with the Committee and Board meetings.
CORPORATE GOVERNANCE STATEMENT
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 15
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
5. Social and Environmental Responsibilities
The Board is conscious of the Company’s social and environmental responsibilities. Particular attention is given to projects which have a long
term positive impact on the society and the environment. These include provision of clean drinking water and sponsorship of childrens education.
The Company encourages staff to participate and actively support their various causes.
6. Going Concern
The directors have made an assessment of the ‘Company’s Ability to Continue’ as a going concern and are satisfied that the Company has
the resources to continue in business for the foreseeable future. Therefore the financial statements continue to be prepared on the going
concern basis.
M Kibati A K M Shah Chairman Director
14 April, 2014
REPORT OF THE DIRECTORS
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)16
The directors submit their report together with the audited financial statements of APA Life Assurance Limited (the “Company”) for the year ended
31 December, 2013 which disclose the state of affairs of the Company.
Incorporation And Registered Office
The Company is incorporated in Kenya under the Companies Act and is domiciled in Kenya. The registered office is situated at Apollo Centre, 07
Ring Road Parklands, Westlands, P. O. Box 30389 – 00100, Nairobi.
Change Of Company Name
The Company changed its name from Apollo Life Assurance Limited to APA Life Assurance Limited effective 5 November, 2013.
Principal Activities
The principal activity of the Company is the transaction of long term insurance business.
ResultsLong-term Shareholders’ 2013 2012
business funds Total Total
Shs’000 Shs’000 Shs’000 Shs’000
(Loss)/profit before taxation (97,423) 10,614 (86,809) (66,224)
Taxation charge (2,864) (1,483) (4,347) (4,330)
(Loss)/profit for the year (100,287) 9,131 (91,156) (70,554)
Other comprehensive income 167,037 31,371 198,408 123,544
Total comprehensive income 66,750 40,502 107,252 52,990
Dividends
The directors recommend a first and final dividend of Shs 25,000,000 (2012: 30,000,000) in respect of the year.
Directors
The current Board of Directors is as listed on page 4 and 5.
Auditors
The Company’s independent auditors Deloitte & Touche, retire at the next Annual General Meeting. They are however not eligible for
reappointment as they have completed the mandatory maximum 7 years allowed under the Kenyan Insurance regulations.
Authorisation Of Financial Statements
The financial statements of APA Insurance Limited for the year ended 31 Decembe, 2013 were authorised for issue in accordance with a resolution of
the directors on 14 April, 2014. The shareholders have the power to amend the financial statements after issue.
By Order Of The Board
P.H.ShahCompany SecretaryNairobi
14 April, 2014
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 17
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Kenyan Companies Act requires the directors to prepare financial statements for each financial year which give a true and fair view of the state
of affairs of the Company, as at the end of the financial year, and of its operating results for that year. It also requires the directors to ensure that
the Company keeps proper accounting records which disclose, with reasonable accuracy, at any time, the financial position of the Company. They
are also responsible for safeguarding the assets of the Company.
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial
Reporting Standards and in the manner required by the Kenyan Companies Act, and for such internal controls as directors determine are necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by
reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and in the manner required by the
Kenyan Companies Act. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of
the Company and of its operating results. The directors further accept responsibility for the maintenance of accounting records which may be relied
upon in the preparation of financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least the next twelve months
from the date of this statement.
M. Kibati A. K. M. Shah
Chairman Director
14 April, 2014
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)18
REPORT OF THE CONSULTING ACTUARY TO THE MEMBERS OF APA LIFE ASSURANCE LIMITEDI have conducted an actuarial valuation of the long term business of APA Life Assurance Limited as at 31 December, 2013.
The valuation was conducted in accordance with generally accepted actuarial principles and the requirements of the Kenyan Insurance Act. Those
principles require prudent provision for future outgo under contracts, generally based upon the assumptions that current conditions will continue.
Provision is therefore not made for all possible contingencies.
In completing the actuarial valuation, I have relied upon the audited financial statements of the company.
In my opinion, the company was financially sound and the actuarial value of the liabilities in respect of all classes of business did not exceed the
amount of funds of the business at 31 December, 2013.
Giles T Waugh, FASSA, FIA
Independent Actuarial Consultant
14 April, 2014
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 19
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF APA LIFE ASSURANCE LIMITED(Formerly Apollo Life Assurance Limited)Report on the Financial Statements
We have audited the accompanying financial statements of APA Life Assurance Limited, set out on pages 24 to 63, which comprise the statement
of financial position as at 31 December, 2013, and the statement of profit or loss and other comprehensive income, statement of changes in equity
and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Directors’ Responsibility for the Financial Statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial
Reporting Standards in the manner required of the Kenyan Companies Act, and for such internal controls as directors determine are necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, we considered the internal controls relevant to the company’s preparation of financial statements that
give a true and fair view in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the state of financial affairs of the Company as at 31 December, 2013 and of its
financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements
of the Kenyan Companies Act.
Report on Other Legal Requirements
As required by the Kenyan Companies Act we report to you, based on our audit, that:
(i) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of
our audit;
(ii) in our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books;
(iii) and the Company’s statement of financial position (balance sheet) and the statement of profit or loss and other comprehensive income (profit
and loss account) are in agreement with the books of account.
The engagement partner responsible for the audit resulting in this independent auditors’ report.
J W Wangai P/No 1118.
Deloitte & Touche
Certified Public Accountants (Kenya)
Nairobi, Kenya
22 April, 2014
PENSION PLANHelps you maintain your lifestyle after
retirement by giving you one of the highest returns on investment in the market
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)20
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 21
CORPORATE SOCIAL RESPONSIBILITY
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)22
CORPORATE SOCIAL RESPONSIBILITYIn 2013, APA continued investing in long term focus areas of
corporate social responsibility. Our objective remains the long term
sustainable projects that uplift the standards of the communities that
we partner with or support. The Company has strived to better the
lives of those in marginalised areas as well as those who are socially
and economically challenged. We are determined to do business in
ways that honour ethical values, comply with regulatory and other
legal requirements, respect humanity and the environment. We aim
to fulfil our social responsibility to all stakeholders through the various
initiatives and projects we undertake.
Social Investment
The following areas have become hallmarks in APA’s social investment:
(A) Aminipoa Maji Maisha
The Apollo Group and partners continued operating in arid and semi-
arid areas providing clean and reliable water for needy communities
through construction of sand dams. IkyaKwoko Self Help Group in
Machakos County were the beneficiaries of a sand dam in 2013. The
community, which has over 1500 households, finally has access to
clean and safe water for domestic use. The water will also be used for
irrigation of crops and trees planted by the river bed.
In order to ensure sustainability of the sand dams, the APA team visits
the communities which have benefited from the dams built in the past.
The benefiting communities are responsible for the maintenance of
the dams. The transformation of the landscape to leafy, green with
thick bushes is amazing. The water tables also significantly rise as
evidenced by scrapping sand from the river bed and water flowing
easily.
Testimonial
One beneficiary, Mr. Mongela says that the Kyandune sand dam
has brought positive transformation to his family and the community
in general. Previously, he depended on rain for farming. But due to
inadequate rainfall and perennial drought, common occurrences
in the area, he was struggling to feed his family. The variability of
rainfall patterns meant that sometimes he could harvest and others
he could not.
During the extreme dry seasons, Mongela’s family would seek relief
food from the chief’s camp and the non-governmental organisations
working in the area. The family would also walk for long distances in
search of water for their domestic needs. Mr. Mongela notes that all
these hassles are gone with the construction of the sand dam and is
very grateful to the Apollo Group.
(B) Youth Initiative Programmes
I. APA/ Apollo bursary fund
The bursary fund, now in its 6th year, has 8 students in high schools
and 4 students in university and colleges. The fund mainly supports
secondary school education costs for the best performing boy and
girl in Kenya Certificate of Primary Examination (KCPE) from Chelata
Primary School. Chelata serves residents of Githogoro and Huruma
which are informal settlements. The mean score performance of
the school has been increasing due to the internal competition. The
Apollo Group also conducts mentorship and motivation clinics during
school holidays for the Chelata students.
II. Recreation Through Sports
The Runda Youth Sports Association (RYSA) football team which is suported by Apollo Group is now in the Football Kenya Federation League - Nairobi County. The league, recognised by Football Kenya and FIFA is a stepping stone for the team to qualify for the National Premier League. The team was 2nd Runners Up in last season’s
Federation League.
APA Apollo Group CEO, Ashok Shah pumps water from a borehore as residents of Kyandune village fill their jerry cans.
APA Life General Manager Aggrey Mulumbi hands over a sponsorship cheque to Michael Kioni, the top student from last year’s KCPE Examination at Chelata Primary School.
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 23
The team has also opened a cyber café to supplement the incomes
and support their members who are not fully employed. The Apollo
Group has currently employed 4 staff previously under RYSA and
Chelata bursary programmes who are active members of the
sports team.
III. Environment Conservation
The Ngongeri farm, started 2 years ago in partnership with Egerton
University students at Njoro Campus, has continued to expand.
We have planted over 20,000 trees. The tree planting exercise
is held annually and we invite staff, clients and students of Njoro
campus to join us in planting the trees, which is our contribution in
conserving the Mau forest.
The Human Resource Administration Communication and ICT
departments also planted trees at Chelata Primary School as part
of their departmental initiatives. The students and RYSA youth also
participated in the exercise.
IV. Other Initiatives
1. Underwriting and Business Development - Visited Prayers Beyond
Boundaries children home in Naivasha
2. Claims and Legal - Visited Nairobi Children Home in Lower Kabete
3. Finance and Internal Audit - Visited Ngu Nyumu primary school in
Kariobangi
4. Health - Visited Kangemi Health Centre
5. City Centre Branch - Visited ABC Children’s Home in Kariobangi
Workplace Welfare
Staff numbers have increased significantly in the past one year due
to expansion in different counties. We have also experienced organic
growth which has led to need of more staff.
On education and training, we have organised numerous staff
trainings in the last year. The trainings have been on technical skills
as well as soft skills, including management. A free health clinic was
organised for all staff members at the annual Team Building event.
Office safety is vital and hence fire marshal training has also been
conducted at Head Office.
The internship placement programme continues with more emphasis
on training to ensure the students from College of Insurance and
various universities are equipped with practical lessons and job skills.
Graduate Management Trainees
The first graduate trainee programme was successfully completed in
December. Six trainees completed the year long course. The trainees were
excited to be assigned to various business units. The 2014 graduate trainee
programme has commenced with 5 candidates being selected from the
leading universities across the country. These trainees will undergo one and
a half years intensive training in various aspects of the business.
Job Shadow Training
Job Shadow is a programme designed to bring home the relevance
of schoolwork and provides students with hands-on experience of
their dream jobs. This programme is facilitated by Junior Achievement
Kenya. We were happy to host twenty students from various secondary
schools across Nairobi. As employers, this gave us an opportunity to
make an impression on the emerging workforce.
Ashok Shah presents a Shs 1 million cheque to Professor Tuitoek of Egerton University during the Mau Conservation Race.
Some RYSA team members during the kit presentation by APA.
CORPORATE SOCIAL RESPONSIBILITY (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)24
GROUP STRUCTURE
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APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)
STATEMENT OFPROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 25
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)26
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013
Long-term Shareholders’ 2013 2012
Notes business funds Total Total
Shs’000 Shs’000 Shs’000 Shs’000
Gross premium income earned 3 414,920 - 414,920 217,031
Reinsurance premium ceded (200,428) - (200,428) (116,922)
Net earned premium 214,492 - 214,492 100,109
Investment income 4 190,181 14,187 204,368 178,172
Commissions earned 45,663 - 45,663 29,654
Total income 450,336 14,187 464,523 307,935
Claims and policyholders’ benefits 5 (407,883) - (407,883) (280,601)
Operating and other expenses 6 (101,506) (3,573) (105,079) (68,743)
Commissions payable (38,370) - (38,370) (17,812)
Total claims and expenses (547,759) (3,573) (551,332) (367,156)
(Loss)/profit from operations (97,423) 10,614 (86,809) (59,221)
Provision for diminution in value of equity shares suspended from trading 12 - - - (7,003)
(Loss)/profit before taxation (97,423) 10,614 (86,809) (66,224)
Taxation charge 8(a) (2,864) (1,483) (4,347) (4,330)
(Loss)/profit for the year (100,287) 9,131 (91,156) (70,554)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
-fair value gain from quoted equities 12 152,187 29,273 181,460 111,941
-fair value gain on government securities 17(b) 14,850 2,098 16,948 11,603
Total other comprehensive income for the year 167,037 31,371 198,408 123,544
Total profit and other comprehensive income 66,750 40,502 107,252 52,990
Appropriated as follows:
Total profit and other comprehensive income 66,750 40,502 107,252 52,990
-Transfer to shareholders (28,949) 28,949 - -
-Taxation on transfer to shareholders 8(a) - (8,685) (8,685) (15,349)
Total profit and other comprehensive income 37,801 60,766 98,567 37,641
Allocated to:
-Investment revaluation reserve - 31,371 31,371 18,025
-Retained earnings - 29,395 29,395 35,726
-Statutory reserves 37,801 - 37,801 (16,110)
Total 37,801 60,766 98,567 37,641
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 27
STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013
2013 2012
Notes Shs’000 Shs’000
Assets
Intangible asset 10 12,593 2,006
Equipment 9 5,843 5,001
Investment properties 11 327,500 285,000
Quoted equity investments - available for sale 12 772,899 483,856
Unquoted equity investments 13 23,008 41,880
Life policy loans 4,402 4,680
Investment in unit trusts 14 39,021 41,823
Reinsurers’ share of insurance liabilities 15 22,514 34,687
Receivables arising from reinsurance arrangements - 5,151
Current tax receivable 8(b) 8,615 -
Other receivables 16 104,598 28,085
Government securities - held to maturity 17(a) 584,800 372,198
- available for sale 17(b) 373,046 301,161
Commercial paper and corporate bonds 18 82,252 36,310
Deposits with financial institutions 19 369,364 395,827
Cash and bank balances 31,905 1,261
Total assets 2,762,360 2,038,926
Equity and Reserves
Share capital 20 250,000 150,000
Investment revaluation reserve 29,624 (1,747)
Retained earnings 21 41,345 41,950
Shareholders’ funds 320,969 190,203
Statutory reserve 22 157,180 119,379
Total statutory reserves and shareholders’ funds 478,149 309,582
Liabilities
Insurance contract liabilities 24 607,981 502,837
Payables under deposit administration contracts 26 1,548,759 1,171,253
Payables arising from reinsurance arrangements 42,426 -
Current tax payable 8(b) - 2,067
Other payables 27 85,045 53,187
Total liabilities 2,284,211 1,729,344
Total equity and liabilities 2,762,360 2,038,926
The financial statements on pages 24 to 63 were approved and authorised for issue by the board of directors on 14 April, 2014 and were signed on its behalf by:
M. Kibati A. K. M. Shah Director Director
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)28
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2013
Total Total
Share capital
Investmentrevaluation
reserveRetained earnings
Shareholders’ funds
Statutory reserves
Shareholder and
statutory reserves
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
At January, 2012 150,000 (19,772) 6,224 136,452 135,489 271,941
Total comprehensive income for the year - 18,025 35,726 53,751 (16,110) 37,641
At 31 December, 2012 150,000 (1,747) 41,950 190,203 119,379 309,582
At January, 2013 150,000 (1,747) 41,950 190,203 119,379 309,582
Issue of new shares 100,000 - - 100,000 - 100,000
Transfer from statement of comprehensive income for the year - 31,371 29,395 60,766 37,801 98,567
Dividends paid - 2012 - - (30,000) (30,000) - (30,000)
At 31 December, 2013 250,000 29,624 41,345 320,969 157,180 478,149
The investments revaluation reserve represents the cumulative unrealised gains and losses on revaluation of available for sale financial assets at each reporting date. The reserve is not distributable.
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 29
STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013
2013 2012
Notes Shs’000 Shs’000
Cash flow from operating activities
Cash generated from operations 28 (a) 236,108 184,843
Interest received 98,106 96,041
Income tax paid 8 (b) (23,714) -
Net cash inflow from operating activities 310,500 280,884
Cash flow from investing activities
Purchase of equipment 9 (3,415) (326)
Additions to intangible asset 10 (10,587) (2,006)
Proceeds from disposal of investment property 11 - 95,000
Purchase of quoted shares 12 (246,968) (89,899)
Proceeds from disposal of quoted shares 198,295 72,623
Net investment in unit trusts 441 1,742
Net policy loans recovered/(advanced) (278) (1,177)
Net investment in corporate bonds (45,942) 9,841
Net investment in government securities (267,535) (50,241)
Uplift/(placement) of deposit with financial institutions 120,598 (248,979)
Net cash outflow from investing activities (255,391) (213,421)
Cash flow from financing activities
Issue of new shares 20 100,000 -
Dividends paid 23 (30,000) -
Net cash inflow from financing activities 70,000 -
Increase in cash and cash equivalents 125,109 67,463
Movement in cash and cash equivalents:
At start of year 147,709 80,246
Increase 125,109 67,463
At end of year 28 (b) 272,818 147,709
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APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)30
HOSICAREThis cover pays you KShs 1000 for
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APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 31
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)32
The principal accounting policies adopted in the preparation of these
financial statements are set out below:
a. Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS). The principal
accounting policies adopted remain unchanged from the previous
year and are set out below.
b. Adoption of new and revised International Financial Reporting standards
i) New standards and amendments to published standards effective
for the year ended 31 December, 2013
The following new and revised IFRSs were effective in the current
year and had no material impact on the amounts reported in
these financial statements.
Amendments to IFRS 7 Disclosures - Offsetting Financial
Assets and Financial Liabilities
The amendments to IFRS 7 require entities to disclose information
about rights of offset and related arrangements (such as
collateral posting requirements) for financial instruments under
an enforceable master netting agreement or similar arrangement.
The application of the amendment had no effect on the Company’s
financial statements as the Company did not have any offsetting
arrangements in place.
New and revised standards on consolidation and joint
arrangements, associates and disclosures
In May 2011, a package of five standards in consolidation
and joint arrangements, associates and disclosures was issued
comprising IFRS 10 Consolidated Financial Statements, IFRS
11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other
Entities, IASs 27 (as revised in 2011) Separate Financial Statements
and IAS 28 (as revised in 2011) Investments in Associates and
Joint Ventures. Subsequent to the issue of these standards,
amendements to IFRS 10, IFRS 11 and IFRS 12 were issued to
clarify certain guidance on first application of the standards.
Application of these standards has not had any impact on
the disclosures or the amounts recognised in these financial
statements as it has not resulted in the Company changing the
way it recognises its subsidiaries, associates and joint ventures.
IFRS 13 Fair Value Measurement
The scope of IFRS 13 is broad; the fair value measurement
requirements of IFRS 13 apply to both financial instrument items
and non-financial instrument items for which other IFRSs require or
permit fair value measurements and disclosures about fair value
measurements, except for share-based payment transactions that
are within the scope of IFRS 2 Share-based Payment, leasing
transactions that are within the scope of IAS 17 Leases, and
measurements that have some similarities to fair value but are not
fair value (e.g. net realisable value for the purposes of measuring
inventories or value in use for impairment assessment purposes).
IFRS 13 defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction in
the principal (or most advantageous) market at the measurement
date under current market conditions. Fair value under IFRS 13 is
an exit price regardless of whether that price is directly observable
or estimated using another valuation technique. Also, IFRS 13
includes extensive disclosure requirements.
IFRS 13 requires prospective application from 1 January, 2013.
In addition, specific transitional provisions were given to entities
such that they need not apply the disclosure requirements set out
in the standard in comparative information provided for periods
before the initial application of the Standard. In accordance with
these transitional provisions, the Company has not made any new
disclosures required by IFRS 13 for the 2012 comparative period.
Other than the additional disclosures, the application of IFRS 13
has not had any material impact on the amounts recognised in
the financial statements.
Amendments to IAS 1 Presentation of Items of Other
Comprehensive Income
The amendments introduce new terminology, the use of which is
not mandatory, for the statement of comprehensive income and
income statement. Under the amendments to IAS 1, the ‘statement
of comprehensive income’ is renamed as the ‘statement of profit
or loss and other comprehensive income’ (and the ‘income
statement’ is renamed as the ‘statement of profit or loss’). The
amendments to IAS 1 retain the option to present profit or loss and
other comprehensive income in either a single statement or in two
separate but consecutive statements. However, the amendments
to IAS 1 require items of other comprehensive income to be
grouped into two categories in the other comprehensive income
section: (a) items that will not be reclassified subsequently to profit
or loss and (b) items that may be reclassified subsequently to profit
ACCOUNTING POLICIES FOR THE YEAR ENDED 31 DECEMBER 2013
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 33
or loss when specific conditions are met. Income tax on items of other
comprehensive income is required to be allocated on the same basis
- the amendments do not change the option to present items of
other comprehensive income either before tax or net of tax. The new
terminologies have been adopted in these financial statements.
Amendments to IAS 1 Presentation of Financial
Statements (as part of the Annual Improvements to
IFRSs 2009 - 2011 Cycle issued in May 2012)
The Annual Improvements to IFRSs 2009 - 2011 have made
a number of amendments to IFRSs. The amendments that are
relevant to the company are the amendments to IAS 1 regarding
when a statement of financial position as at the beginning of the
preceding period (third statement of financial position) and the
related notes are required to be presented. The amendments
specify that a third statement of financial position is required when
a) an entity applies an accounting policy retrospectively, or makes a
retrospective restatement or reclassification of items in its financial
statements, and b) the retrospective application, restatement or
reclassification has a material effect on the information in the
third statement of financial position. The amendments specify that
related notes are not required to accompany the third statement
of financial position.
IAS 19 Employee Benefits (as revised in 2011)
IAS 19 (as revised in 2011) changes the accounting for defined
benefit plans and termination benefits. The most significant
change relates to the accounting for changes in defined benefit
obligations and plan assets. The amendments require the
recognition of changes in defined benefit obligations and in the
fair value of plan assets when they occur, and hence eliminate
the ‘corridor approach’ permitted under the previous version of
IAS 19 and accelerate the recognition of past service costs. All
actuarial gains and losses are recognised immediately through
other comprehensive income in order for the net pension asset
or liability recognised in the consolidated statement of financial
position to reflect the full value of the plan deficit or surplus.
Furthermore, the interest cost and expected return on plan assets
used in the previous version of IAS 19 are replaced with a ‘net
interest’ amount under IAS 19 (as revised in 2011), which is
calculated by applying the discount rate to the net defined benefit
liability or asset.
This amendment had no effect on the company’s financial
statements as the company does not operate a defined
benefit plan.
ii) Relevant new and amended standards and interpretations in issue
but not yet effective in the year ended 31 December, 2013
New and Amendments to standards
Effective for annual periods beginning on or after
IFRS 9 1 January, 2015
Amendments to IFRS 9 and IFRS 7 1 January, 2015
Amendments to IFRS 10, IFRS 12 and IAS 27 1 January, 2014
Amendments to IAS 32 1 January, 2014
iii) Impact of new and amended standards and interpretations on the
financial statements for the year ended 31 December, 2013 and
future annual periods
IFRS 9 Financial Instruments
IFRS 9, issued in November 2009, introduced new requirements for
the classification and measurement of financial assets. IFRS 9 was
amended in October 2010 to include requirements for the classification
and measurement of financial liabilities and for derecognition.
Key requirements of IFRS 9:
• All recognised financial assets that are within the scope of
IAS 39 Financial Instruments: Recognition and Measurement
are required to be subsequently measured at amortised
cost or fair value. Specifically, debt investments that are
held within a business model whose objective is to collect
the contractual cash flows, and that have contractual cash
flows that are solely payments of principal and interest on the
principal outstanding are generally measured at amortised
cost at the end of subsequent accounting periods. All other
debt investments and equity investments are measured at
their fair value at the end of subsequent accounting periods.
In addition, under IFRS 9, entities may make an irrevocable
election to present subsequent changes in the fair value of
an equity investment (that is not held for trading) in other
comprehensive income, with only dividend income generally
recognised in profit or loss.
ACCOUNTING POLICIES (CONTINUED)Adoption of new and revised International Financial Reporting standards (Continued)
i) New standards and amendments to published standards effective for the year ended 31 December, 2013 (Continued)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)34
Key requirements of IFRS 9 (continued)
With regard to the measurement of financial liabilities designated
as at fair value through profit or loss, IFRS 9 requires that the
amount of change in the fair value of the financial liability that is
attributable to changes in the credit risk of that liability is presented
in other comprehensive income, unless the recognition of the effects
of changes in the liability’s credit risk in other comprehensive income
would create or enlarge an accounting mismatch in profit or loss.
Changes in fair value attributable to a financial liability’s credit risk
are not subsequently reclassified to profit or loss. Under IAS 39, the
entire amount of the change in the fair value of the financial liability
designated as fair value through profit or loss is presented in profit or
loss. The directors of the company anticipate that the application of
IFRS 9 in the future may have a significant impact on amounts reported
in respect of the company’s financial assets and financial liabilities
(e.g. the company’s investments in redeemable notes that are currently
classified as available-for-sale investments will have to be measured
at fair value at the end of subsequent reporting periods, with changes
in the fair value being recognised in profit or loss). However, it is not
practicable to provide a reasonable estimate of the effect of IFRS 9 until
a detailed review has been completed.
iii) Impact of new and amended standards and interpretations
on the financial statements for the year ended 31 December,
2013 and future annual periods
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities
The amendments to IFRS 10 define an investment entity and require a
reporting entity that meets the definition of an investment entity not to
consolidate its subsidiaries but instead to measure its subsidiaries at fair
value through profit or loss in its consolidated and separate financial
statements. To qualify as an investment entity, a reporting entity is
required to:
• Obtain funds from one or more investors for the
purpose of providing them with professional investment
management services.
• Commit to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both.
• Measure and evaluate performance of substantially all of
its investments on a fair value basis.
Consequential amendments have been made to IFRS 12 and
IAS 27 to introduce new disclosure requirements for investment
entities. The directors of the company do not anticipate that
the investment entities amendments will have any effect on
the company’s financial statements as the Company is not an
investment entity.
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
The amendments to IAS 32 clarify the requirements relating
to the offset of financial assets and financial liabilities.
Specifically, the amendments clarify the meaning of ‘currently
has a legally enforceable right of set-off’ and ‘simultaneous
realisation and settlement’.
The directors of the company do not anticipate that the
application of these amendments to IAS 32 will have a
significant impact on the company’s financial statements.
Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)
Amends IAS 36 Impairment of Assets to reduce the
circumstances in which the recoverable amount of assets or
cash-generating units is required to be disclosed, clarify the
disclosures required, and to introduce an explicit requirement
to disclose the discount rate used in determining impairment
(or reversals) where recoverable amount (based on fair value
less costs of disposal) is determined using a present value
technique.
The directors of the company do not anticipate that the
application of these amendments to IAS 36 will have a
significant impact on the company’s financial statements.
Novation of Derivatives and Continuation of Hedge
Accounting (Amendments to IAS 39)
Amends IAS 39 Financial Instruments: Recognition and
Measurement to make it clear that there is no need to
discontinue hedge accounting if a hedging derivative is
novated, provided certain criteria are met.
A novation indicates an event where the original parties to
a derivative agree that one or more clearing counterparties
replace their original counterparty to become the new
counterparty to each of the parties. In order to apply the
amendments and continue hedge accounting, novation to a
central counterparty (CCP) must happen as a consequence of
ACCOUNTING POLICIES (CONTINUED)Adoption of new and revised International Financial Reporting standards (Continued)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 35
laws or regulations or the introduction of laws or regulations.
The directors of the company do not anticipate that the
application of these amendments to IAS 39 will have a
significant impact on the company’s financial statements.
Annual improvements: 2010-2012 cycle
The annual improvements 2010-2012 cycle makes
amendments to the following standards:
• IFRS 2 — Amends the definitions of ‘vesting condition’ and
‘market condition’ and adds definitions for ‘performance
condition’ and ‘service condition’.
• IFRS 3 — Require contingent consideration that is
classified as an asset or a liability to be measured at fair
value at each reporting date.
• IFRS 8 — Requires disclosure of the judgments made
by management in applying the aggregation criteria to
operating segments, clarify reconciliations of segment
assets only required if segment assets are reported
regularly.
• IFRS 13 — Clarify that issuing IFRS 13 and amending IFRS
9 and IAS 39 did not remove the ability to measure certain
short-term receivables and payables on an undiscounted
basis (amends basis for conclusions only).
• IAS 16 and IAS 38 — Clarify that the gross amount of
property, plant and equipment is adjusted in a manner
consistent with a revaluation of the carrying amount.
• IAS 24 — Clarify how payments to entities providing
management services are to be disclosed.
Annual improvements: 2011-2013 cycle
Makes amendments to the following standards:
• IFRS 1 — Clarify which versions of IFRSs can be used on
initial adoption (amends basis for conclusions only).
• IFRS 3 — Clarify that IFRS 3 excludes from its scope the
accounting for the formation of a joint arrangement in the
financial statements of the joint arrangement itself.
• IFRS 13 — Clarify the scope of the portfolio exception in
paragraph 52.
• IAS 40 — Clarifying the interrelationship of IFRS 3 and
IAS 40 when classifying property as investment property
or owner-occupied property.
These IFRS improvements are effective for accounting periods
beginning on or after 1 January, 2014. The directors of
the company do not anticipate that the application of these
improvements to IFRSs will have a significant impact on the
company’s financial statements.
iii) Early adoption of standards
The company did not early-adopt any new or amended
standards in 2013.
c. Basis of preparation
The financial statements are prepared under the historical cost
convention, as modified by the revaluation and the carrying
of certain assets at their fair values.
d. Revenue recognition
Premiums are recognised as revenue when earned from
the policyholders. Premiums are shown before deduction of
commission.
Commissions receivable are recognised as income in the
period in which they are earned.
Interest income is recognised on a time proportion basis that
takes into account the effective yield on the asset.
Dividends receivable are recognised as income in the period
in which the right to receive payment is established.
Rental income from operating leases is recognised on a
straight line basis over the term of the lease.
ACCOUNTING POLICIES (CONTINUED)Adoption of new and revised International Financial Reporting standards (Continued)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)36
e. Claims incurred
Claims and policyholders’ benefits payable comprise claims paid in
the year and changes in the provision for insurance contract liabilities.
Claims paid represent all payments made during the year, whether
arising from events occurring during that or earlier years. Insurance
contract liabilities represent the estimated ultimate cost of settling all
claims arising from incidents occurring prior to the end of the reporting
period, but not settled at that date. Insurance contract liabilities are
computed on the basis of the best information available at the time
the records for the year are closed, and include provisions for claims
intimated but not paid. Insurance contract liabilities are not discounted.
Claims arising on maturing policies are recognised when the claim
becomes due for payment. Death claims are accounted for on
notification. Surrenders are accounted for on payment.
f. Deposit administration contracts
The Company administers the funds of a number of retirement benefit
schemes. The Company’s liabilities in relation to these schemes have
been treated as payables in the statement of financial position. The
liabilities with respect to the deposit administration contracts are
determined by the Consulting Actuary on an annual basis.
g. Reinsurance
The Company assumes and cedes reinsurance in the normal course
of business, with retention limits varying by line of business. Premiums
on reinsurance assumed are recognised as income in the same
manner as they would be if the reinsurance were considered direct
business. Premiums ceded and claims reimbursed are presented on
a gross basis in profit and loss and statement of financial position
as appropriate.
Reinsurance assets represent balances due from reinsurance
companies. Amounts recoverable from reinsurers are estimated in
a manner consistent with the outstanding claims provision or settled
claims associated with the reinsurer’s policies and are in accordance
with the related reinsurance contract.
Impairment occurs when there is objective evidence as a result of an
event that occurred after initial recognition of the reinsurance asset that
the company may not receive all outstanding amounts due under the
terms of the contract and the event has a reliably measurable impact
on the amounts that the company will receive from the reinsurer. The
impairment loss is recognised in the profit or loss.
Ceded reinsurance arrangements do not relieve the Company from its
obligations to policyholders. The Company also assumes reinsurance
risk in the normal course of business for life insurance and non-
life insurance contracts where applicable. Premiums and claims on
assumed reinsurance are recognised as revenue or expenses in the
same manner as they would be if the reinsurance were considered
direct business, taking into account the product classification of the
reinsured business. Reinsurance liabilities represent balances due to
reinsurance companies. Amounts payable are estimated in a manner
consistent with the related reinsurance contract.
Reinsurance assets or liabilities are derecognised when the contractual
rights are extinguished or expire or when the contract is transferred
to another party.
h. Equipment
All equipment are initially recorded at cost less depreciation and any
accumulated impairment losses. The useful lives used in determining
depreciation charge are:
Computer equipment 3 years
Motor vehicles 4 years
Furniture fittings and equipment 8 years
The residual values of items of equipment and their estimated useful lives
are reviewed at the reporting date and adjusted if appropriate. Where
the carrying amount of an asset is greater than its estimated recoverable
amount, it is written down immediately to its recoverable amount.
Gains and losses on disposal of property and equipment are
determined by reference to their carrying amounts.
i. Intangible assets – Computer software
Intangible assets comprise of computer software costs which are stated
at cost less accumulated amortisation and any impairment losses.
Amortisation is calculated to write off the cost of computer software on
a straight line basis over its estimated useful life of five years.
j. Investment properties
Investment properties comprises land and buildings held to earn
rentals and/or for capital appreciation. They are carried at fair value,
determined at the reporting date by valuation experts with experience
and knowledge of the locations where the properties are located. Fair
value is based on active market prices as adjusted, if necessary, for
any difference in the nature, condition or location of the specific asset.
ACCOUNTING POLICIES (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 37
Investment Properties (Continued)
Investment properties are not subject to depreciation. Changes in their
carrying amount between end of reporting periods are dealt with,
through profit or loss for the year. Upon disposal of an investment
property, the difference between the net disposal proceeds and the
carrying amount is charged or credited to profit or loss for the year.
k. Financial Instruments
Financial assets
The company classifies its financial assets into the following
categories: financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity financial assets and available-
for-sale financial assets. The classification adopted for a particular
investment depends on the purpose for which the investment
was acquired. Management determines the classification of its
investments at initial recognition and re-evaluates this at every
reporting period end.
i) Financial assets at fair value through profit or loss (“FVTPL”)
This category has two sub-categories: financial assets held
for trading and those designated at fair value through profit
or loss at inception. A financial asset is classified into this
category at inception if acquired principally for the purpose
of selling in the year, if it forms part of a portfolio of financial
assets in which there is evidence of profit-taking or if so
designated by management.
ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Receivables arising from insurance contracts are also
classified in this category and are reviewed for impairment as
part of the impairment review of loans and receivables.
iii) Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial
assets with fixed or determinable payments and fixed
maturities – other than those that meet the definition of loans
and receivables – that the company’s management has the
positive intention and ability to hold to maturity.
iv) Available-for-sale financial assets
This classification represents financial assets that are not (a)
financial assets at fair value through profit or loss, (b) loans
and receivables, or (c) financial assets held to maturity.
Recognition of financial assets
Financial assets are initially recognised cost plus transaction costs.
Available-for-sale financial assets and financial assets at fair value
through profit or loss are subsequently carried at fair value. Loans
and receivables and held-to-maturity investments are carried at
amortised cost using the effective interest method. Gains and losses
arising from changes in the fair value of “financial assets at fair
value through profit or loss” are dealt with in the profit or loss in the
period in which they arise. Gains and losses arising from changes
in the fair value of available-for-sale financial assets are recognised
through other comprehensive income and accumulated under a
separate heading of fair value reserve in the statement of changes in
equity, until the financial asset is derecognised or impaired, at which
time the cumulative gain or loss previously recognised through other
comprehensive income is recognised in the profit or loss for the year.
Effective interest method
The effective interest method is a method of calculating the amortised
cost of a financial asset and of allocating interest income over the
relevant period. The effective interest rate is the rate that exactly
discounts estimated cash receipts including all fees, transaction costs
and premiums or discounts through the expected life of the financial
asset, or, where appropriate, a shorter period.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss,
are assessed for indicators of impairment at each reporting date.
Financial assets are impaired where there is objective evidence
that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of
the investment have been impacted.
Objective evidence of impairment for receivables could include the
Company’s past experience of collecting payments, an increase in the
number of delayed payments past the average credit period as well
as observable changes in national or local economic conditions that
correlate with default on receivables.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the exception of
trade receivables, where the carrying amount is reduced through the
use of an allowance account. When a trade receivable is considered
uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are recognized as income
in the profit and loss account. Changes in the carrying amount of the
allowance account are recognised in profit or loss.
ACCOUNTING POLICIES (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)38
Derecognition of financial assets
The company derecognises a financial asset only when the contractual
rights to the cash flows from the asset expire; or it transfers the financial
asset and substantially all the risks and rewards of ownership of the
asset to another entity. If the company neither transfers nor retains
substantially all the risks and rewards of ownership and continues
to control the transferred asset, the company recognises its retained
interest in the asset and an associated liability for amounts it may have
to pay. If the company retains substantially all the risks and rewards
of ownership of a transferred financial asset, the company continues
to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.
l. Financial liabilities and equity instruments issued by the Company
Debt and equity instruments are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangement.
Classification as debt or equity
An equity instrument is any contract that evidences a residual interest
in the assets of an entity after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Financial liabilities
Financial liabilities, including borrowings, are initially measured at
fair value, net of transaction costs and are subsequently measured
at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis. The effective interest
method is a method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability,
or, where appropriate, a shorter period.
Derecognition of financial liabilities
The company derecognises financial liabilities when, and only when,
the company’s obligations are discharged, cancelled or they expire.
m. Translation of foreign currencies
Transactions in foreign currencies during the year are converted into
Kenya Shillings at rates ruling at the transaction dates. Assets and
liabilities at the statement of financial position date which are expressed
in foreign currencies are translated into Kenya Shillings at rates ruling
at that date. The resulting differences from conversion and translation
are dealt with in profit or loss for the year.
n. Accounting for leases
Leases of assets where a significant proportion of the risks and
rewards of ownership are retained by the company as a lessee are
classified as finance leases. All other leases are classified as operating
leases. Payments made under operating leases are charged to profit
or loss for the year on the straight-line basis over the term of the lease.
o. Employee entitlements
Employee entitlements to long service awards are recognised when
they accrue to employees. A provision is made for the estimated
liability for such entitlements as a result of services rendered by
employees up to the reporting date. The estimated monetary liability
for employees’ accrued annual leave entitlement at the reporting date
is recognised as an expense accrual.
p. Fair value hierarchy
The Company specifies a hierarchy of valuation techniques based on
whether the inputs to those valuation techniques are observable or
unobservable. Observable inputs reflect market data obtained from
independent sources; unobservable inputs reflect the company’s
market assumptions. These two types of inputs have created the
following fair value hierarchy:
• Level 1 – Quoted prices in active markets for identical assets
or liabilities. This level includes equity securities and debt
instruments traded on the Nairobi Securities Exchange.
• Level 2 – Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly as
prices or indirectly as derived from prices.
• Level 3 – inputs for the assets or liabilities that are not based
on observable market data (unobservable inputs). This
level includes equity investments and debt instruments with
significant unobservable components.
This hierarchy requires the use of observable market data when
available. The company considers relevant and observable market
prices in its valuations where possible.
ACCOUNTING POLICIES (CONTINUED)Impairment of financial assets (continued)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 39
q. Income tax
Tax charge/(credit) comprises current tax and deferred tax. Tax
is recognised as charge/(credit) and included in the profit or loss,
except to the extent that the tax arises from a transaction which is
recognised in other comprehensive income, in which case the tax is
also recognised in other comprehensive income.
Current tax is computed in accordance with the Kenyan income tax
laws applicable to insurance companies.
Deferred tax is provided, using the liability method, for all temporary
differences arising between the tax bases of assets and liabilities and
their carrying values for financial reporting purposes. Tax rates enacted
or substantively enacted at the reporting date are used to determine
deferred tax.
Deferred tax assets are recognised only to the extent that it is probable
that future taxable profits will be available against which the temporary
differences can be utilised. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities.
r. Retirement benefit obligations
The Company operates a defined contribution scheme for its
employees. The assets of the scheme are held in a separate trustee
administered fund, which is funded from contributions from both the
company and employees. Contributions are determined by the rules
of the scheme.
The Company also contributes to the statutory defined contribution
pension scheme, the National Social Security Fund (NSSF). Contributions
to this scheme are determined by local statute and are currently governed
by the newly introduced NSSF Act. 2013 under ( implementation.)
The Company’s obligations to these schemes are charged to profit or
loss in the year they fall due.
s. Comparatives
Where necessary, comparative figures have been adjusted to conform
to changes in presentation in the current year.
t. Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the company’s accounting policies,
management has made estimates and assumptions that affect the
reported amounts of assets and liabilities within the next financial year.
Estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
i) Critical accounting judgments in applying the company’s accounting policies
The key areas of judgment in applying the company’s accounting
policies are dealt with as follows:
Future benefit payments from long-term insurance contracts
The estimation of future benefit payments from long-term
insurance contracts is one of the company’s most critical
accounting estimates. There are several sources of uncertainty
that need to be considered in the estimate of the liability that the
Company will ultimately pay for such claims.
The determination of the liabilities under long-term insurance
contracts is dependent on estimates made by the Company.
Estimates are made as to the expected number of deaths for
each of the years in which the Company is exposed to risk.
The Company bases these estimates on standard mortality
tables that reflect historical mortality experience. The estimated
number of deaths determines the value of the benefit payments
and the value of the valuation premiums. The main source of
uncertainty is that epidemics such as AIDS could result in future
mortality being significantly worse than in the past for the age
groups in which the Company has significant exposure to
mortality risk.
However, continuing improvements in medical care and social
conditions could result in improvements in longevity in excess
of those allowed for in the estimates used to determine the
liability for contracts where the Company is exposed to longevity
risk. For contracts without fixed terms and with discretionary
participation in profits, it is assumed that the Company will be
able to increase mortality risk charges in future years in line with
emerging mortality experience. Estimates are also made as to
future investment income arising from the assets backing long-
term insurance contracts.
ACCOUNTING POLICIES (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)40
These estimates are based on current market returns as well as
expectations about future economic and financial developments.
The average estimated rate of investment return is 12.50% p.a.
(2012: 12.50% p.a).
Held-to-maturity investments
The company follows the guidance of IAS 39 in classifying
non-derivative financial assets with fixed or determinable
payments and fixed maturity as held-to-maturity. This
classification requires significant judgment. In making this
judgment, the company evaluates its intention and ability
to hold such investments to maturity. If the company fails to
hold these investments to maturity other than for the specific
circumstances - for example, selling more than an insignificant
amount close to maturity - it will be required to reclassify
the entire class as available-for-sale.The investments would
therefore be measured at fair value and not at amortised cost.
ii) Key sources of estimation uncertainty
Impairment losses
At the reporting date, the company reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss.
Where it is not possible to estimate the recoverable amount
of an individual asset, the company estimates the recoverable
amount of the cash generating unit to which the asset belongs.
Equipment
Critical estimates are made by the company’s directors in
determining depreciation rates and useful lives for equipment.
Incurred but not reported claims
Estimates are made for claims Incurred But Not Reported
(IBNR) as at the year end based on the historical claims
development statistics and evaluation of the current, past and
future assumptions. Using the chain ladder model, the group
has developed estimates of expected claims outstanding.
ACCOUNTING POLICIES (CONTINUED)t. Critical accounting judgments in applying and key sources of estimation of uncertainity (continued)
(i) Critical judgments in applying the Company’s accounting policies (Continued)
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1 INCORPORATION AND REGISTERED OFFICE
APA Life Assurance Limited (formerly Apollo Life Assurance Limited) is a limited liability company incorporated in Kenya under the Kenyan
Companies Act and domiciled in Kenya. The parent company, which is the ultimate holding company is Apollo Investments Limited
which is incorporated in Kenya. The address of its registered office is 07 Apollo Centre, Ring Road Parklands, Westlands, Nairobi.
2 RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company’s activities expose it to a variety of risks, including insurance risk, financial risk, credit risk, and the effects of changes in property
values, debt and equity market prices, foreign currency exchange rates and interest rates. The Company’s overall risk management programme
focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance, by use of
underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the
approval of intermediaries and reinsurers. Investment policies are in place which help manage liquidity, and seek to maximize return within an
acceptable level of interest rate risk. The Company manages key risks as follows:
2.1 Insurance risk management
The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the
resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.
For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the
Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance
liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are
random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical
techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability of the
expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset
of the portfolio. The Company has developed its insurance underwriting and investment strategy to diversify the type of risks accepted
and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.
Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical, local and type
of industry covered.
The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the Company’s financial performance. It manages these positions within an asset-liability management
(ALM) framework that has been developed to achieve investment returns in excess of obligations under insurance contracts. The
Company produces regular reports at portfolio, legal entity and asset and liability class level that are circulated to the Company’s
key management personnel. The principal technique of the company’s ALM framework is to match assets to the liabilities arising from
insurance contracts by reference to the type of benefits payable to contract holders. Separate portfolios of assets are maintained for
with-profit business, non-linked non profit business, and unit-linked business. For the purposes of the ALM framework, the Company
does not manage the fund for future appropriations as a liability. The Company’s ALM is also integrated with the management of the
financial risks associated with the Company’s other financial assets and liabilities not directly associated with insurance and investment
liabilities. The Company does not use hedge accounting.
The Company has not changed the processes used to manage its risks from previous periods. The notes below explain how insurance
risks are managed using the categories utilised in the Company’s ALM framework.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 45
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
The Company engages in long-term insurance contracts and funds the insurance liabilities with a portfolio of equity and debt securities exposed to
market risk. An analysis of the Company’s financial assets and its long-term insurance liabilities is presented below:
2013 2012
Financial assets Shs’000 Shs’000
Debt securities:
- Government securities - held to maturity 584,800 372,198
- available for sale 373,046 301,161
- Commercial paper & corporate bonds 82,252 36,310
- Investment in unit trusts 39,021 41,823
Equity securities:- listed 772,899 483,856
- unlisted 23,008 41,880
Receivables from reinsurance contracts and life policy loans 26,916 44,518
Deposits with financial institutions 369,364 395,827
Bank and cash balances 31,905 1,262
Total 2,303,211 1,718,835
Insurance contracts 607,981 502,837
Payable under deposit administration contracts 1,548,759 1,171,253
Payables arising from reinsurance contracts 42,426 -
Total 2,199,166 1,674,090
Under certain contracts, the Company has offered guaranteed annuity options. In determining the value of these options, estimates have been made
as to the percentage of contract holders that will exercise them. There is not enough historical information available on which to base these estimates.
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)46
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.1 Insurance risk management (continued)
The table below shows the contractual timing of undiscounted cash flows arising from assets and liabilities included in the Company’s
ALM framework for management of long term insurance contracts movement as at 31 December, 2013
Total No stated 0-1 1-5 >5
maturity year years years
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Financial assets
Debt securities:
Government bonds and treasury bills fixed rate
- held to maturity 734,294 - 159,886 166,202 408,206
- available for sale 380,588 380,588 - - -
Listed securities-fixed rate 97,232 9,568 15,285 13,125 59,254
Equity securities:
- listed 772,899 772,899 - - -
- unlisted 23,008 23,008 - - -
Investment in unit trusts 39,021 3,903 7,804 27,314 -
Life policy loans and receivables from reinsurance contracts 26,916 - 26,916 - -
Cash and cash equivalents 401,269 - 401,269 - -
Total 2,475,227 1,189,966 611,160 206,641 467,460
Liabilities
Insurance contracts 607,981 35,000 63,003 351,109 158,869
Payables arising from reinsurance arrangements 42,426 - 42,426 - -
Payables under deposit insurance contracts 1,548,759 1,548,759 - - -
Total 2,199,166 1,583,759 105,429 351,109 158,869
Difference in contractual cash flows 276,061 (393,793) 505,731 (144,468) 308,591
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 47
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.1 Insurance risk management (Continued)
The table below shows the contractual timing of discounted cash flows arising from assets and liabilities included in the Company’s Asset
Liability Management framework for management of long term insurance contracts movement as at 31 December, 2012.
Total No stated 0-1 1-5 >5
maturity year years years
Financial assets Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Debt securities:
-Government bonds and treasury bills fixed rate
- Held to maturity 417,160 - 56,801 78,734 281,625
- Available for sale 331,157 331,157 - - -
Listed securities-fixed rate 39,941 - - 5,550 34,391
Equity securities:
-Listed 483,856 483,856 - - -
-Unlisted 41,880 41,880 - - -
Investment in unit trusts 41,823 - 11,248 30,575 -
Life policy loans and receivables from reinsurance contracts 44,518 - 44,518 - -
Cash and cash equivalents 397,088 - 397,088 - -
Total 1,797,423 856,893 509,655 114,859 316,016
Liabilities
Insurance contracts 502,837 35,000 103,134 124,047 240,656
Payables under deposit insurance contracts 1,171,253 1,171,253 - - -
Payables arising from reinsurance contracts held - - - - -
Total 1,674,090 1,206,253 103,134 124,047 240,656
Difference in contractual cash flows 123,333 (349,360) 406,521 (9,188) 75,360
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)48
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.2 Financial risk management (Continued)
The Company is exposed to a range of financial risks through its financial assets, financial liabilities (investment contracts and
borrowings), reinsurance assets and policyholder liabilities. In particular, the key financial risk is that the proceeds from financial
assets are not sufficient to fund the obligations arising from insurance policies and investment contracts as they fall due. The most
important components of this financial risk are market risk (including interest rate risk, equity price risk and currency risk), credit risk and
liquidity risk.
These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific
market movements. The risks that the Company primarily faces due to the nature of its investments and liabilities are interest rate risk
and equity price risk.
(a) Market risks
(i) Interest rate risk
Interest rate risk arises primarily from investments in fixed interest securities. In addition to the extent that claims costs are related
to interest rates, liabilities to policyholders are exposed to interest rate risk. Insurance and non profit investment contracts have
benefit payments that are fixed and guaranteed at the inception of the contract. The financial component of these benefits is
usually a guaranteed fixed interest rate (for the insurance contracts, this rate may apply to maturity and/or death benefits) and
hence the Company’s primary financial risk on these contracts is the risk that interest income and capital redemptions from the
financial assets backing the liabilities are insufficient to fund the guaranteed benefits payable.
The Company monitors interest rate risk by calculating the mean duration of the investment portfolio and of the liabilities to
policyholders under insurance and investment contracts. The mean duration is an indicator of the sensitivity of the assets and
liabilities to changes in current interest rates. The mean duration of the liabilities is determined by means of projecting expected
cash flows from the contracts using best estimates of mortality and voluntary terminations. This is calculated in a consistent
manner with the prior year. Any gap between the mean duration of the assets and the estimated mean duration of the liabilities
is minimised by means of buying and selling fixed interest securities of different durations.
The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument
will fluctuate because of changes in market interest rates at the reporting date. For the guaranteed element of liabilities under
with-profits contracts, changes in interest rate will not cause a change to the amount of the liability because their carrying
amounts are not affected by the level of market interest rates. However the with profits element of the liabilities is directly
affected by changes in the level of interest rates to the extent that they affect the carrying amount of the assets held in the
with profits funds.
The Company’s management monitors the sensitivity of reported interest rate movements on a monthly basis by assessing the
expected changes in the different portfolios.
Interest bearing instruments securities represent 51.70% (2012: 54.4%) of total investments. If interest rates in market indices
had increased / decreased by a further 5%, with all other variables held constant, and all the Company’s investments
moving according to the historical correlation with the index, income would increase / decrease by Shs 71.8million
(2012: Shs 55.5million).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 49
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.2 Financial risk management (Continued)
(a) Market risks (continued)
(ii) Equity price risk
The Company is exposed to equity securities price risk as a result of its holdings in equity investments, classified as financial
assets available for sale. Exposures to individual companies and to equity shares in aggregate are monitored in order to
ensure compliance with the relevant regulatory limits for solvency purposes. Investments held are listed and traded on the
Nairobi Stock Exchange and other recognised stock exchanges.
The Company has a defined investment policy which sets limits on the Company’s exposure to equities both in aggregate
terms and by geography, industry and counterparty. This policy of diversification is used to manage the Company’s price
risk arising from its investments in equity securities. Investment management meetings are held daily. At these meetings,
senior investment managers meet to discuss investment return and concentration across the Company.
The sensitivity analysis for equity risk illustrates how changes in the fair value of equity securities will fluctuate because of
changes to market prices, whether those changes are caused by factors specific to the individual equity issuer, or factors
affecting all similar equity securities traded in the market.
Listed equities securities represent 97% (2012: 92%) of total equity investments. If equity market indices had increased
/ decreased by a further 5%, with all other variables held constant, and all the Company’s equity investments
moving according to the historical correlation with the index, equity would increase / decrease by Shs 38.6 million
(2012: Shs 24.2 million).
(iii) Currency risk
Foreign currency exchange risk arises when future commercial transactions or recognised assets and liabilities are
denominated in a currency that is not the entity’s functional currency. The Company primarily transacts in the Kenya shilling
and its assets and liabilities are denominated in the same currency. The Company is therefore not exposed to currency risk.
(b) Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Company is
exposed to credit risk are:
• reinsurers’ share of insurance liabilities and reserves;
• amounts due from reinsurers in respect of claims already paid;
• amounts due from insurance contract holders;
• amounts due from insurance intermediaries;
• amounts due from corporate bond issuers and
• amount held with financial institutions - under cash and cash equivalents
The Company manages the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of
counterparties and to geographical and industry segments. Such risks are subject to regular review. Limits on the level of credit
risk by category and territory are approved quarterly by the board of directors.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)50
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.2 Financial risk management (Continued)
(b) Credit risk (Continued)
Reinsurance is used to manage insurance risk. This does not, however, discharge the company of its liability as the primary
insurer. If a reinsurer fails to pay a claim, the company remains liable for the payment to the policyholder. The creditworthiness
of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalization of any contract. In
addition, management assesses the creditworthiness of all reinsurers and intermediaries by reviewing credit grades provided
by rating agencies and other publicly available financial information. The recent payment history of reinsurers is also used to
update the reinsurance purchasing strategy.
Management information reported to the directors include details of provisions for impairment on receivables and subsequent
write offs. Internal audit makes regular reviews to assess the degree of compliance with the company’s procedures on credit.
Exposures to individual policyholders and groups of policyholders are within the ongoing monitoring of the controls associated
with regulatory solvency. Where there exists significant exposure to individual policyholders or homogenous groups of
policyholders, a financial analysis is carried out by the management.
The Company’s assets bearing credit risk are summarized below:
2013 2012
Shs ‘000 Shs ‘000
Investment in unit trust 39,021 41,823
Government securities 957,846 673,358
Reinsurers share of insurance liabilities 22,514 34,687
Other receivables 104,597 28,085
Corporate bonds and commercial paper 82,252 36,310
Deposits with financial institutions 369,364 397,088
Total assets bearing credit risk 1,575,594 1,211,351
The assets reported above include Shs 39.0million (2012: Shs 41.8) related to the assets backing unit linked contracts. The
holders of these contracts bear the credit risk arising from these assets. The assets above also include assets held in the with-
profits funds where the company is able to transfer part of the credit risk arising from these assets to holders of with-profits
investment and insurance contracts to the extent that the future level of discretionary bonuses can be reduced to absorb any
associated credit losses (as well as losses arising from all other financial risks). During the year, there was no financial asset that
was past due and impaired.
(c) Liquidity risk
Liquidity risk is the risk that cash may not be available at a reasonable cost to pay obligations as they fall due. The primary
liquidity risk of the Company is the obligation to pay claims to policyholders as they fall due. The projected settlement of these
liabilities is modelled, on a regular basis, using actuarial techniques. The board sets limits on the minimum proportion of
maturing funds available to meet such calls and on the minimum level of borrowing facilities that should be in place to cover
anticipated liabilities and unexpected levels of demand.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 51
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.2 Financial risk management (Continued)
(c) Liquidity risk (continued)
The table below provides the contractual maturity analysis of the Company’s financial liabilities at 31 December, 2013:
No stated maturity
Less than 1 year
More than 1 year Total
Sh’000 Sh’000 Sh’000 Sh’000
Insurance contract liabilities 607,981 - - 607,981
Payables under deposit insurance contracts 1,548,759 - - 1,548,759
Other payables - 85,045 - 85,488
The table below provides a contractual maturity analysis of the Company’s financial liabilities as at 31 December, 2012:
No stated maturity
Less than 1 year
More than 1 year Total
Sh’000 Sh’000 Sh’000 Sh’000
Insurance contract liabilities 35,000 103,134 364,703 502,837
Payables under deposit insurance contracts 1,171,253 - - 1,171,253
Other payables - 53,187 - 53,187
(d) Unit-linked contracts
For unit-linked contracts the Company matches all the liabilities with assets in the portfolio on which the unit prices are based.
There is therefore no interest, price, currency or credit risk for the Company on these contracts.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)52
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.3 Fair value hierarchy
The following table shows an analysis of assets recorded at fair value by level of the fair value hierarchy.
Level 1 Level 2 Level 3 Total
31 December, 2013 Shs’000 Shs’000 Shs’000 Shs’000
Available for sale
- Government securities 373,046 - - 373,046
- Quoted equities 772,899 - - 772,899
Investment properties - 327,500 - 327,500
Total 1,145,945 327,500 - 1,473,445
31 December, 2012
Available for sale
- Government securities 301,161 - - 301,161
- Quoted equities 483,856 - - 483,856
Investment properties - 285,000 - 285,000
Total 785,017 285,000 - 1,070,017
2.4 Capital risk management
The Company maintains an efficient capital structure from a combination of equity shareholders’ funds and borrowings, consistent with
the Company’s risk profile and the regulatory and market requirements of its business.
The Company is subject to a number of regulatory capital tests and also employs a number of realistic tests to allocate capital and
manage risk.
In reporting the Company’s financial strength, capital and solvency is measured using the regulations prescribed by the Insurance
Regulatory Authority (IRA). These regulatory capital tests are based upon required levels of solvency capital and a series of prudent
assumptions in respect of the type of business written by the Company.
The Company’s objectives in managing its capital are:
• to match the profile of its assets and liabilities, taking account of the risks inherent in the business;
• to maintain financial strength to support business growth;
• to satisfy the requirements of its policyholders, regulators and rating agencies;
• to retain financial flexibility by maintaining strong liquidity and access to a range of capital markets;
• to allocate capital efficiently to support growth; and
• to manage exposures to movement in exchange rates.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 53
2 RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
2.4 Capital Risk Management (Continued)
An important aspect of the Company’s overall capital management process is the setting of target risk-adjusted rates of return for
individual business units, which are aligned to performance objectives and ensure that the Company is focused on the creation of value
for shareholders.
The Company has a number of sources of capital available to it and seeks to optimise its debt to equity structure in order to ensure that
it can consistently maximise returns to shareholders. The Company considers not only the traditional sources of capital funding but the
alternative sources of capital including reinsurance, as appropriate, when assessing its deployment and usage of capital. The Company
manages as capital all items that are eligible to be treated as capital for regulatory purposes.
The Company is regulated by the Insurance Regulatory Authority and is subject to insurance solvency regulations which specify the
minimum amount and type of capital that must be held in addition to the insurance liabilities. Long term insurance companies operating
in Kenya are required to have a minimum paid up capital of Shs 150 million.
The Company manages capital in accordance with these rules and has embedded in its ALM framework the necessary tests to ensure
continuous and full compliance with such regulations. The Company has complied with all externally imposed capital requirements
throughout the year.
The constitution of capital managed by the Company is as shown below:
2013 2012
Shs’000 Shs’000
Share capital 250,000 150,000
Investment revaluation reserve 29,624 (1,747)
Retained earnings 41,345 41,950
Statutory reserve 157,180 119,379
Shareholders’ funds and statutory reserves 478,149 309,582
3 GROSS EARNED PREMIUM INCOME
The Company is organised into two main divisions - ordinary life and group life business. Long term business relates to the underwriting of risks
relating to death of an insured person, and includes contracts subject to the payment of premiums for a term dependent on the termination or
continuance of the life of an insured person. The premium income of the Company is analysed between the main classes of business as shown
below:
Class of business 2013 2012
Shs ‘000 Shs ‘000
Ordinary life 20,338 26,006
Group life 394,582 191,025
Total 414,920 217,031
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)54
4 INVESTMENT INCOME2013
Shs ‘000
2012
Shs ‘000
Interest from Government securities 60,710 68,419
Bank deposit interest 37,396 27,622
Rental income from investment properties 10,865 11,428
Dividends received from equity investments 15,696 18,571
Fair value gain on investment properties (note 11) 42,500 30,000
Fair value (loss)/gain from unit trust contracts(note 14) (3,243) 2,069
Realised gain on the sale of financial assets - 1,706
Realised gain on sale of quoted equities 40,038 17,736
Other income 406 621
Total 407,883 178,172
5 CLAIMS AND POLICYHOLDERS’ BENEFITS PAYABLE
Life and death claims 49,065 14,800
Surrenders and annuity payments 35,808 29,103
Maturities 21,360 27,791
Increase in actuarial value of insurance contract liabilities 128,680 87,986
Interest declared on deposit administration contracts 172,970 120,921
Total 407,883 280,601
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 55
6 OPERATING AND OTHER EXPENSES
2013 2012
Shs ‘000 Shs ‘000
Staff costs (note 7) 47,664 37,637
Accrued leave 1,023 163
Auditors’ remuneration 2,135 1,986
Directors emoluments – fees 3,372 2,875
Depreciation (note 9) 2,573 2,361
Repairs and maintenance expenditure 465 69
Rent of office space 8,227 7,155
Advertising and promotion 15,030 2,723
Professional fees 4,859 2,644
Business levies and taxes 1,556 838
Insurances costs 1,450 1,125
Traveling, motor vehicle and accommodation 3,850 2,367
License and subscriptions 571 599
Others 12,304 6,201
Total 105,079 68,743
7 STAFF COSTS
Salaries and wages 42,357 33,397
Social security benefit costs 126 103
Retirement benefit costs 5,181 4,137
Total 47,664 37,637
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)56
8 TAXATION
(A) Current Taxation
2013 2012
Shs ‘000 Shs ‘000
Current income tax charge 13,032 19,679
Reconciliation of taxation charge to the expected taxation based on accounting profit
Profit on account of shareholders 4,948 9,880
Excess management expenses 9,546 4,555
Transfer to shareholders 28,949 51,162
Total taxable income 43,443 65,597
Tax applicable at the rate of 30% (2012: 30%) 13,032 19,679
Represented by:
Tax on profit on account of shareholders 1,483 2,964
Tax on excess of management expenses charged to life business 2,864 1,366
Tax on transfer to shareholders 8,685 15,349
Total 13,032 19,679
(B) Taxation (Recoverable)/ Payable
At 1 January 2,067 (17,612)
Tax paid during the year (23,714) -
Current taxation charge (note 8(a)) 13,032 19,679
At 31 December (8,615) 2,067
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 57
9 EQUIPMENT
Motorvehicles Computers
Furniture, fittings &
equipment
Total
Shs’000 Shs’000 Shs’000 Shs’000
At cost:
At 1 January, 2012 6,961 3,851 5,542 16,354
Additions - 219 107 326
At 31 December, 2012 6,961 4,070 5,649 16,680
At 1 January, 2013 6,961 4,070 5,649 16,680
Additions - 2,306 1,109 3,415
At 31 December, 2013 6,961 6,376 6,758 20,095
Depreciation:
At 1 January, 2012 3,665 3,421 2,232 9,318
Charge for the year 1,440 297 624 2,361
At 31 December, 2012 5,105 3,718 2,856 11,679
At 1 January, 2013 5,105 3,718 2,856 11,679
Charge for the year 1,365 491 717 2,573
At 31 December, 2013 6,470 4,209 3,573 14,252
Net book value:
At 31 December, 2013 491 2,167 3,185 5,843
At 31 December, 2012 1,856 352 2,793 5,001
10 INTANGIBLE ASSET (WORK IN PROGRESS)
2013 2012
Shs ‘000 Shs ‘000
At 1 January, 2013 2,006 -
Additions 10,587 2,006
At 31 December 12,593 2,006
The Company is implementing a new software system which is expected to be complete and in use during 2014.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)58
11 INVESTMENT PROPERTIES
2013 2012
Shs ‘000 Shs ‘000
At 1 January 285,000 350,000
Disposals -
(95,000)
Fair value gains 42,500 30,000
At 31 December 327,500 285,000
Investment properties are stated at fair value as determined by the directors based on the market conditions prevailing at the end of the
reporting period. The directors were guided by the independent valuation carried by Axis Real Estate Limited, as at 31 December, 2013, on
the basis of open market value for existing use. The resultant change in fair value has been included in profit for the year.
The fair value is supported by market evidence and represents the amount at which assets could be exchanged between knowledgeable,
willing buyer and seller in an arm’s length transaction at the date of valuation. The fair valuation basis takes into account the existing use,
the tenancies and considers the normal lease structure for similar buildings.
The net rental income generated by investment properties during the year amounted to Shs 10,986,000 (2012: Shs 11,428,000).
12 QUOTED EQUITY INVESTMENTS
Available for sale
2013 2012
Shs ‘000 Shs ‘000
At 1 January 483,856 361,642
Additions 246,968 89,899
Reclassified from unquoted equities (Note13) 18,872 -
Disposals (158,257) (72,623)
Provision for diminution in value of equity shares suspended from trading - (7,003)
Fair value gains 181,460 111,941
At 31 December 772,899 483,856
Investments in quoted shares are carried at fair value based on the market values at close of business on 31 December, except the
investment in CMC Holdings Limited (a Company suspended from trading on the NSE) which has been valued at Shs 13 per share based
on a take-over offer price made to all the shareholders of the Company by Al-Futtaim Auto & Machinery Limited.
Fair value gains are recognised through other comprehensive income.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 59
13 UNQUOTED EQUITY INVESTMENTS
2013 2012
Shs’000 Shs’000
At 1 January 41,880 41,880
Reclassified to quoted shares available for sale (Note12) (18,872) -
At 31 December 23,008 41,880
The investment held at year end comprises investment in shares of unquoted companies and is carried at cost. Based on the impairment
testing performed at the end of the reporting period, the directors do not consider the investments to be impaired (2012: Nil).
During the year, shares held at equity holding of I & M Bank Limited were swapped for listed equities of I&M Holdings Limited (previously
City Trust Limited). They have consequently been reclassified to quoted equities held as available for sale.
14 INVESTMENT IN UNIT TRUSTS
2013 2012
Shs’000 Shs’000
At 1 January 41,823 41,496
Additions 2,733 4,700
Withdrawals & fees (2,292) (6,442)
Net change in fund value (3,243) 2,069
At 31 December 39,021 41,823
Unit trusts are unit linked investment contracts designated as financial assets at fair value through profit or loss. These funds are managed
by Old Mutual Asset Managers (K) Limited. The benefits offered under the contract are based on the return of the portfolio of equities and
debt securities. The maturity value of the financial liabilities is determined by the fair value of the linked assets held by Old Mutual Asset
Managers (K) Limited.
15 REINSURERS’ SHARE OF INSURANCE LIABILITIES
2013 2012
Shs’000 Shs’000
At 31 December (note 25) 22,514 34,687
Amounts due from reinsurers in respect of claims outstanding with the Company on contracts that are reinsured are included as reinsurers’
share of liabilities in the statement of financial position
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)60
16 OTHER RECEIVABLES
2013 2012
Shs’000 Shs’000
Due from a related company (note 30) - 179
Prepayments and deposits 7,500 7,273
Staff advances 4,736 2,157
Rent receivables 5,286 1,638
Accrued dividend income 1,664 5,210
Trade debtors 32,947 8,576
Proceeds receivables from disposal of shares 47,373 -
Others 5,092 3,052
At 31 December 104,598 28,085
17 GOVERNMENT SECURITIES
(A) Government Securities - Held To Maturity
Treasury bills and bonds maturing:
- In 1 year 158,094 25,101
- In 1- 5 years 111,010 135,668
- After 5 years 315,696 211,429
Total 584,800 372,198
(B) Government Securities-Available For SaleAt January 301,161 240,785
Additions 120,658 74,700
Sales - (23,077)
Maturity (65,721) (2,850)
Fair value gain 16,948 11,603
Total 373,046 301,161
These bonds are carried at fair values based on the Nairobi Securities Exchange mid prices as at 31 December.
18 COMMERCIAL PAPER & CORPORATE BONDS
Commercial paper and bonds held to maturity:
- In 1 -5 years 5,193 9,420
- Over 5 years 77,059 26,890
Total 82,252 36,310
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 61
19 DEPOSITS WITH FINANCIAL INSTITUTIONS
2013 2012
Shs’000 Shs’000
Held to maturity:
- Within 90 days 240,913 146,448
- Within 1 year 128,451 249,379
Total 369,364 395,827
20 SHARE CAPITAL
Authorised Share Capital
2,500,000 (2012: 1,500,000) ordinary shares of Shs 100 each 250,000 150,000
Issued and fully paid Share Capital:
2,500,000 (2012: 1,500,000) ordinary shares of Shs 100 each 250,000 150,000
On 20 August, 2013, the shareholders of the Company approved the issuance of 999,998 new ordinary shares of Shs 100 each whose
amount has since been paid.
21 RETAINED EARNINGS
The retained earnings represent the transfer of accumulated surpluses from the long-term insurance business net of tax. Movement in the
retained earnings is shown in the statement of changes in equity on page 26.
22 STATUTORY RESERVE
The statutory reserve represents actuarial surpluses from the long term business whose distribution is subject to restrictions imposed by the
Insurance Act. The Act restricts the amounts of surpluses of the long-term business available for distribution to shareholders to 30% of the
accumulated surplus of the long term insurance business. The movement in the statutory reserve is shown in the statement of changes in
equity on page 26.
23 DIVIDENDS
The directors recommend a first and final dividend of Shs 25,000,000 in respect of the year. (2012: Shs 30,000,000). The financial
statements for the year ended 31 December, 2013 do not reflect this resolution which will be accounted for in shareholders’ equity as an
appropriation of retained profits in the year ending 31 December, 2014.
During the year, the 2013 final dividend of Shs 30,000,000 (2012: Shs Nil) was fully disbursed to shareholders. Payment of dividends is
subject to withholding tax at a rate of either 5% or 10% depending on the residence of the shareholder.
24 INSURANCE CONTRACT LIABILITIES
2013 2012
Long term insurance contracts at 31 December Shs’000 Shs’000
- claims reported and claims handling expenses 63,003 61,785
- actuarial liabilities with respect to contracts in force 544,978 441,052
Total 607,981 502,837
Insurance contract liabilities comprises gross claims reported, claims handling expenses and actuarial liabilities with respect to all contracts
in force for ordinary and group life business.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)62
25 MOVEMENTS IN INSURANCE LIABILITIES AND REINSURANCE ASSETS
2013 2012
Gross Reinsurance Net Gross Reinsurance Net
Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
At start of year 502,837 (34,687) 468,150 433,606 (33,447) 400,159
Cash paid for claims settled in the year (99,830) 65,316 (34,514) (101,530) 19,406 (82,124)
Total 403,007 30,629 433,636 332,076 (14,041) 318,035
(Decrease)/Increase in liabilities arising -
- from prior year claims 165,005 (32,148) 132,857 110,863 (16,406) 94,457
- from current year claims 39,969 (20,995) 18,974 59,898 (4,240) 55,658
Total increase in liabilities 204,974 (53,143) 151,831 170,761 (20,646) 150,115
Total 607,981 (22,514) 585,467 502,837 (34,687) 468,150
Notified claims 63,003 (22,514) 40,489 61,785 (34,687) 27,098
Actuarial value of life contract liabilities 544,978 - 544,978 441,052 - 441,052
Total at the end of year 607,981 (22,514) 585,467 502,837 (34,687) 468,150
26 AMOUNTS PAYABLE UNDER DEPOSIT ADMINISTRATION CONTRACTS
Movements in amounts payable under deposit administration contracts during the year are as shown below. The liabilities are shown
inclusive of interest accumulated to 31 December. Interest was declared and credited to the customer accounts at a weighted average rate of
14.00% (2012:12.50%). During the year, bonus stabilisation reserve has been increased by Shs 24,754,000 for the benefit of policyholders
to be utilised in future years.
2013 2012
Shs’000 Shs’000
At 1 January 1,171,253 881,596
Pension fund deposits received 318,400 246,708
Interest payable to policyholders 172,970 120,921
Bonus stabilisation reserve 24,754 20,000
Pension fund withdrawals (138,618) (97,972)
At 31 December 1,548,759 1,171,253
27 OTHER PAYABLES
Due to related companies (note 30) 3,466 4,321
Accrued expenses 29,675 9,594
Accrued leave costs 2,083 974
Rental deposits 1,976 2,515
Premium deposits 32,468 25,671
Other liabilities 15,377 10,112
At 31 December 85,045 53,187
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 63
28 (A) NOTES TO THE STATEMENT OF CASH FLOWS
2013 2012
Shs’000 Shs’000
Reconciliation of profit before taxation to cash generated from operations:
Loss before taxation (86,809) (66,224)
Adjustments for:
Interest income 4 (98,106) (96,041)
Profit on sale of available for sale financial assets 4 (40,038) (19,442)
Depreciation charge 9 2,573 2,362
Fair value gain on investment properties 11 (42,500) (30,000)
Provision for diminution in value of equity shares suspended from trading 12(b) - 7,003
Fair value loss/ (gain) on unit trust investments 14 3,243 (2,069)
Changes in:
- technical provisions 494,823 357,650
- receivables arising from reinsurance arrangement 47,577 (6,960)
- other payables 31,858 21,772
- other receivables (76,513) 16,792
Cash generated from operations 236,108 184,843
(B) CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents comprise the following:
Cash and bank balances 31,905 1,261
Deposits with financial institutions (note 19) 240,913 146,448
Total 272,818 147,709
29 CONTINGENT LIABILITIES
In common with the insurance industry in general, the Company is subject to litigation arising in the normal course of insurance business.
At the reporting date, there was no litigation that the Company was aware of. The directors are of the opinion that any litigation that may
arise from this source will not have a material effect on the financial position or profits of the Company.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)64
30 COMMITMENTS
Capital expenditure contracted for at the end of the reporting period date but not recognised in the financial statements is as follows:
2013 2012
Shs’000 Shs’000
Authorised and contracted for 30,000 24,317
Authorised but not contracted for 44,759 43,500
Total 74,759 67,817
Operating Lease Commitments
The future minimum lease payments under operating leases are as follows:
Due not later than 1 year 8,227 7,834
Due after 1 year and not later than 5 years 41,135 36,036
Later than 5 years 9,461 9,009
Total 58,823 52,879
31 RELATED PARTIES
In the normal course of business, insurance policies are sold to related parties at terms and conditions similar to those offered to major
clients. The Company is a wholly owned subsidiary of Apollo Investments Limited, also incorporated in Kenya. Apollo Holdings Limited,
Apollo Asset Management Company Limited, Gordon Court Limited and APA Insurance Limited are related to Apa Life Assurance Limited
through common shareholdings and directorships.
Outstanding balances with related parties 2013 2012
Shs’ 000 Shs’ 000
(i) Due from related parties (note 15)
Due from Apollo Investments Limited - -
Due from Apollo Asset Management Company Limited - 179
Total - 179
(ii) Due to related parties (note 27)
Due to Apollo Investment Limited 3,355 2,006
Due to Gordon Court Limited 102 30
Due to APA Insurance Limited 9 2,285
Total 3,466 4,321
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 65
31 RELATED PARTIES (CONTINUED)
(iii) Related party transactions
2013 2012
Shs’000 Shs’000
Apollo Asset Management Company Limited
Payment of asset management fees 5,253 3,528
Gordon Court Company Limited Payment of office rent /space 8,227 7,834
APA Insurance Limited Receipt of pension contribution (deposit administration) 48,757 41,115
Sale of group life assurance 3,710 2,581
Purchase of medical insurance premiums 1,127 1,779
Purchase of property & motor vehicle insurance 323 241
Total 67,397 57,078
(iv) Key management and directors’ compensation
Directors’ fees 3,372 2,875
Other remuneration - -
Key management compensation 31,229 25,393
Total 34,601 28,268
32 WEIGHTED AVERAGE EFFECTIVE INTEREST RATES
The following table summarises the Company’s weighted average effective interest rates realised during the year on the principal interest-
bearing investments:
2013 2012
% %
Government securities 12 12
Deposits with financial institutions 15 15
Commercial paper & corporate bonds 12 12
33 CURRENCY
The financial statements are presented in Kenya shillings thousands (Shs’000).
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 (CONTINUED)
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)66
Ordinary Life Group Life (DAP) Total Total
business business Other 2013 2012
Shs’ 000 Shs’ 000 Shs’ 000 Shs’ 000 Shs’ 000
Gross earned premium 20,338 394,582 - 414,920 217,031
Reinsurance premiums ceded - (200,428) - (200,428) (116,922)
Net earned premium 20,338 194,154 - 214,492 100,109
Investment income 41,914 28,757 119,510 190,181 165,930
Commission earned - 45,663 - 45,663 29,654
Total income 62,252 268,574 119,510 450,336 295,693
Claims and policy holder benefit -
Life and death claims (365) (48,701) - (49,066) (14,800)
Surrenders and annuity payments (659) (35,148) - (35,807) (29,103)
Maturities (21,360) - - (21,360) (27,791)
Increase actuarial value of insurance contract liabilities/reserves 2,350 (106,276) (24,754) (128,680) (87,986)
Interest on deposit administration contracts - - (172,970) (172,970) (120,921)
Net claims and policyholder benefits payable (20,034) (190,125) (197,724) (407,883) (280,601)
Expenses -
Operating and other expenses (25,186) (63,695) (12,625) (101,506) (66,381)
Commissions payable (563) (33,865) (3,942) (38,370) (17,812)
Total expenses and commissions (25,749) (97,560) (16,567) (139,876) (84,193)
Profit/(loss) the year before taxation 16,469 (19,111) (94,781) (97,423) (69,101)
Income tax - (2,864) - (2,864) (1,366)
Profit/(loss) for the year after taxation 16,469 (21,975) (94,781) (100,287) (70,467)
The above supplementary information was approved by the board of directors on 14 April, 2014 and signed on its behalf by:
M. Kibati A. K. M. Shah
Chairman Director
SUPPLEMENTARY INFORMATION
REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2013
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited) 67
APA LIFE ASSURANCE LIMITED (Formerly Apollo Life Assurance Limited)68